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Friday, 8 February 2008

From a host preparing for a dinner party to a country constructing a new national stadium, we all tend to underestimate how long things are going to take - an error that's been dubbed the 'planning fallacy'. According to Ola Svenson, contributing to this proclivity for tardiness is our inability to accurately decide between time-saving options.

Consider these increases in speed for a 100km car journey. Don't work out the detailed mathematics. Rather, for both pairs, just make an intuitive judgement about which jump in speed will make the largest difference to your time of arrival (i.e. save the most time):

a)Travelling at 50km/h instead of 40km/h.
b)Travelling at 130km/h instead of 80km/h.

a)Travelling at 50km/h instead of 30km/h.
b)Travelling at 130km/h instead of 60km/h.

If you're like most of the participants in Svenson's study, you will have assumed that option (b) in both pairs is the most time saving. In fact, for the first pair, the time saved is equal (allowing for rounding off), and for the second pair, option (a) saves more time. From analysing participants' judgements, Svenson found that people seem to be mistakenly comparing the ratios of the two changes in speeds - applying what she calls the Ratio Rule.

It can also apply in other contexts. Consider an administration overhaul at a hospital clinic, such that the number of patients treated by each doctor per day is increased. In each pair, which improvement would free up the most doctors to go and work elsewhere?

Svenson again found that her participants consistently applied the Ratio Rule, so that most of them said erroneously that option (a) was more time saving for the first pair, and that option (b) was more time saving for the second pair.

So why do we always apply the Ratio Rule if it consistently leads to the wrong judgement? Svenson said the Ratio Rule works when both options start from the same point (e.g. the same speed, or the same number of patients treated). This may then lead it to become a reinforced and favoured rule applied in real-life experiences.

According to Svenson, this bias in the way we compare time saving options has real-world implications. For example, people who are already driving fast will overestimate the time saved by driving even faster. Meanwhile, politicians may be prone to improving an already fast operation, rather than making improvements to a slower operation with more time-saving potential.
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